[EN] Tech companies flock to Miami to reach Latin America

MIAMI—This city is well known for its coastline, club scene and condo-building crazes. Now it is adding a new distinction: tech hub.

A startup scene is stirring here, driven in part by U.S. companies seeking to tap Latin America's expanding technology market and a growing crop of Latin American entrepreneurs hoping to gain a foothold here.

"We are the logical point to be the technology capital of Latin America," given the city's long-standing commercial and cultural ties to the region, said Manuel Medina, founder of Terremark, a Miami data-services company acquired by Verizon Communications for $1.4 billion in 2011.

Already, Miami can point to several successes. Open English, an online English-language school launched in Venezuela in 2008 and now based in Miami, has grown to 2,000 employees in seven offices across the hemisphere. The company has raised roughly $130 million in venture capital over the years, said founder Andres Moreno.

Last month, .CO Internet, a Miami company that operates the top-level domain assigned to Colombia and has grown to include more than 1.6 million Web addresses, was sold for $109 million to telecommunications firm Neustar Inc.

Not all the companies are tied to Latin America. CareCloud, which helps doctors run their offices using cloud-based services, counts roughly 6,000 physicians around the country as clients and has raised more than $45 million in venture backing.

Venture-capital investment in Miami-area companies jumped to $369 million in 2013 from $102 million in 2010, according to VentureSource, a unit of News Corp's Dow Jones, which owns The Wall Street Journal. That pales in comparison to the $12.4 billion in venture-capital funding for Silicon Valley businesses in 2013. But it isn't that far behind the $538 million raised in the Austin, Texas, tech hub.

Miami still faces numerous challenges. Entrepreneurs say there is a dearth of local funding sources beyond wealthy angel investors, forcing many of them to look outside the city to raise venture capital. Some complain about a shortage of candidates to fill senior-level positions. Others say local mentors are hard to come by.

"We have a great opportunity, but we have to keep doing the hard work," said Juan Pablo Cappello, an entrepreneur and attorney at Private Advising Group P.A. in Miami. "We don't need to oversell or overhype. If we have a chance, it will be as a niche player in the tech ecosystem."

That means focusing on Miami's strengths, such as its connections to Latin America and its health-care sector, Mr. Cappello said. For a city that has long relied on tourism and real estate to fuel its economy, "that can still be transformative," he added.

Entrepreneurs in Latin America say Miami offers numerous advantages. It already serves as a hemispheric hub, where many big companies base their Latin America operations. It has direct flights to cities across the region. And it provides a more stable environment to do business—and greater access to capital—than many countries to the south.

Serge Elkiner, co-founder of YellowPepper, a mobile-banking and payments company, built up the business in Ecuador. But when it came time to expand to other countries in Latin America, he moved the headquarters to Miami. "It's the best hub for Latin America in terms of travel," he said, as well as the city where most large financial institutions base their operations for the hemisphere. "If you want to be regional, Miami is the best place to be."

Latin America's online population grew faster than any other region's in the year ended March 2013, according to market-research firm comScore Inc. Startups are also proliferating, nurtured by a rising number of tech incubators, and some reach a point where access to U.S. investors and expertise becomes key to continued growth.

An array of groups is nurturing the Miami tech scene. Over the past 18 months, the not-for-profit John S. and James L. Knight Foundation has pumped $6 million into about 60 projects aimed at building up the ecosystem. Its largest single investment—$2 million—went to Endeavor, a not-for-profit organization that supports entrepreneurs and has 20 offices around the world. Last year, the group opened its first U.S. affiliate in Miami.

Endeavor focuses on companies that have already shown they're viable and helps propel their growth by connecting them with mentors, investors and new markets. One Miami business it is backing is KidoZen, which helps large companies like Microsoft Corp. and Toyota Motor Corp. build mobile applications. The company, which launched in 2013, has 39 employees spread between Miami and Buenos Aires and took in $5 million in revenue last year, according to its founder, Jesus Rodriguez.

Other support programs and venues have sprouted up as well. Last year, The LAB Miami, a collaborative workspace, moved from a 700-square-foot space to a 10,000-square-foot warehouse in the artsy Wynwood district to meet demand. Among its members is Michael McCord, who founded LearnerNation, a training-software company whose clients include MasterCard Inc. and Celebrity Cruises.

Venture Hive, a tech incubator and accelerator, opened downtown last year with grants from the city and county and now houses 31 companies from 18 countries, said founder Susan Amat. Earlier this month, Microsoft said it would open its first U.S.-based Innovation Center at the facility, featuring classes, workshops and plenty of gadgetry.

The announcement was timed to the debut of eMerge Americas Techweek in Miami Beach, a conference spearheaded by Mr. Medina that he billed as a Latin American version of the South by Southwest festival in Austin, Texas. The event brought together investors, established tech companies and startups from South Florida and Latin America for panels, hackathons and—as this is Miami—parties.

The notion of Miami as a tech hub for the Americas has a precedent. In the 1990s, a host of tech companies focused on the Latin American market, including Patagon.com and StarMedia, either launched in or moved to Miami. But back then, the dot-com bust stifled the scene.

Now, the timing could be ripe to reprise the idea. "In Latin America, there is an insatiable appetite to acquire new technologies," Mr. Medina said. And "there's such an incredible amount of talent. Kids are coming up with fantastic ideas."